The Euro monetary system is flawed. It is a
system that was cobbled together for political purposes; and sadly it was set
up in such a way that each member state retained significant sovereign powers -
most importantly the ability to exit the system and default on debts in times
of stress. There is virtually NO federal power in the Union, as witnessed by the complete
breakdown of the Maastrict and Lisbon treaties.

In other words, those governments with
surpluses will have to give the money away in order to sustain their surplus
and others’ deficit, and it has to continue to do so forever, or else the
economies of both surplus and deficit countries will contract. Ask Germany if they would like to see this happening, and I doubt if they would say
“yes”.

Rationally, then, this standoff should end with
a compromise—relaxing some austerity measures, and giving Greece a little more
aid and time to reform. And we may still end up there. But the catch is that Europe isn’t arguing just about what the
most sensible economic policy is. It’s arguing about what is fair.

"The bank scheme would see all eurozone
lenders forced to pay an annual levy to a deposit guarantee scheme set up as a
separate company. The company would be back-stopped with cash from the EU, the
ECB or the new ESM." Bottom line: the "silver bullet" plan is
"secret? because it is a total farce, and nobody could possibly present it
with a straight face for one simple reason - there is no source of money. No
hold on, there is - Germany. And as Merkel made it very clear, Germany will not fund it. Why? Because once it starts, it won't end.

…what would actually happen with these claims
should a periphery nation exit. The exit would simply result in a
re-denomination of some claims. There is no other way to do this. As loans to
Greek banks become drachma denominated, so will the claim on the Bank of Greece (BoG), with the
central bank separating from the Eurosystem. The Eurosystem was never designed
for an exit of a central bank, so this process would need to be cobbled
together on the fly - sort of the way the Greek restructuring was done. The
"exercise" may potentially set up a process for other nations exiting
the EMU.

Whose idea was this single currency anyway? We
speak to Graham Bishop, one of the founding architects of the euro, who
believes reports of its demise are greatly exaggerated. We hear from the brewer
SAB Miller on the role of big business in managing scarce global resources.
And Lucy Kellaway of the Financial Times reflects on parting shots; when
quitting your job, what's the best way to abuse your ex-employer?

“Governments must take on their
responsibilities and not subcontract them out to monetary policy.” Aiming
squarely at Paul Krugman, he said, “In the US, certain people
believe that the ECB should buy more sovereign debt like the American Federal
Reserve. But we’re not a federal state, and the Fed doesn’t buy the debt of California or Florida.” And he vetoed in
advance any new Long Term Refinancing Operations (LTRO)

The ECB’s cooperation would have to be
solicited for this…The plan, viewed as highly unorthodox by analysts, involves
Madrid issuing Spanish government guaranteed debt to Bankia in return for
equity, with the bank then able to deposit the bonds with European Central Bank
as collateral for cash…Spain has not yet made any approach to the ECB on how
its capital-raising plan would work, according to an official familiar with the
situation.

Spain's Plans to Recapitalize Bankia Will Put Germany, ECB at Risk; When Does the Ponzi Scheme Collapse? – Mish’s

A Spanish government source says the plan is
float what amounts to junk bonds, pawn them off to the ECB and use the proceeds
to "recapitalize" Bankia. Of course the ECB (bankrolled by Germany) is at enormous risk were this preposterous scheme to actually happen. This
is what I want to know: When does Germany say it has had enough of these preposterous schemes?

Sources told us last night that Spain may
recapitalize stricken Bankia with government bonds in return for shares in the
bank…The ECB’s view of this will be crucial since the plan seems to involve the
bank depositing the new bonds with the ECB as collateral in return for cash.